Now it's official: OAS will construct Estádio Dunas

RN Government confirms winner. Work starts in June.

At a press interview held late this Friday afternoon (March 11th) at the Governorship Auditorium (Administrative Center) in the city of Natal, the Governor of the State of Rio Grande do Norte, Rosalba Ciarline, confirmed OAS as the winner of the tender for the Estádio das Dunas. According to the Head of the Executive in the State of Rio Grande do Norte, the announcement was brought forward by eleven days – it would have been made on March 23rd – as the State Tender Commission felt that the only competing company met all the technical and financial requirements.

“We hope that this month we will be able to sign the Service Order”, the State Governor said. “Now, indeed, we can say that the World Cup belongs to Natal”, declared the Minister for Pensions and Senator, Garibaldi Alves Filho, who was also present at the press interview together with the Mayor of Natal, Micarla de Sousa, and the Vice-Mayor of Natal and Coordinator of the World Cup Nucleus in the city, Paulinho Freire. The Table also had the presence of the Secretary for the World Cup in the state of Rio Grande do Norte, Demétrio Torres.

Time FramesNo representative of OAS showed up at the press conference. The company will only make a statement after the result of the tender has been published in the Official Gazette of the State (Diário Oficial do Estado – DOE). “We have gained an additional eleven days with the announcement made today, and from here on we will do what we can to speed the process up as much as possible. We will already announce the name of the company winning the tender in this official gazette and, as the Governor well said, we hope to sign the service order this month”, said Mr. Torres.

If there are no queries against the company that won the tender, within the next five business days, then OAS and the State Government will get together and discuss the establishment of a Specific Purpose Society (Sociedade de Propósitos Específicos - SPE), which is a company that will be established to construct and also manage the Estádio das Dunas over the next 20 years. “Only by means of an SPE can OAS receive the guaranteed financing from the National Bank for Economic and Social Development (BNDES) for this construction work”, said Mr. Torres.

The BNDES has opened a credit line for a total of R$ 400 million for the construction or refurbishment of the World Cup arenas.

Amsterdam ArenaAs the commercial representative of OAS, Elmar Varjão, who was at the ceremony of handing over the proposals on March 2nd in Natal, had already hinted, the Amsterdam Arena should be included in the SPE. “The company will be our partner in the management of the stadium, which is, after all, its end purpose”, said Mr. Varjão.

By June, the Machadão/Machadinho sports complex will be demolished and the time frame for the delivery of the new Arena has been set at December 2013. “We have promised the Soccer Federation that the construction work on the Machadão would only begin after the end of the Rio Grande do Norte State Soccer Championship. However, there is nothing to stop the construction of the worksite and other activities before the demolition gets under way”, said Mr. Torres. The Potiguarzão will stay in place to the beginning of May, while the forecast for the demolition of the Machadão is in the beginning of June.

Counter payment: R$ 1.2 billionThe work on the Estádio das Dunas has been assessed at R$ 400 million and, according to Demétrio Torres, the state will only start to make the counter payments to OAS two years after the construction of the Arena. This means after December 2015, if the work is completed according to the expected time frame of December 2013.

The Secretary for the World Cup was not able to give an exact value for this counter payment, but hinted that it should be in the region of R$ 9 million per month. This means that the Government should pass on an approximate total of R$ 1.2 billion to the private partner during a period of 12 years. The values of the monthly payments are fixed and the interest is already built into the amount due.

“The calculation is quite simple: it is as if you bought a car by hire purchase. The total value, when you think about it, is never the same as the value for outright payment, as market interest rates are already inbuilt into the fixed payments. The same is the case with the counter payment of the State in the case of the Estádio das Dunas”, Mr. Torres said, trying to explain the high cost of the work for the State.

After a period of 20 years as mentioned in the Invitation to Bid, the company that manages the stadium will pass the Arena on to the State Government or renews the partnership by signing a new contract.

To make sure of the monthly payment of the counter payment in this first contract for a Public-Private Partnership in Rio Grande do Norte, the RN Government has attached to the tender documents for the Public-Private Partnership (PPP) a Guarantee Fund, which is appropriate for any PPP as formally established in the State. This Fund consists of properties and also a financial cushion of R$ 70 million comprising oil and gas royalties.

“This sum has been included in the Invitation to Bid that we were required to make to provide the business with greater liquidity, thus giving greater security to the private investor”, Mr. Torres said.